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Simple English definitions for legal terms
LBO
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A quick definition of LBO:
Term: LBO
Definition: LBO stands for leveraged buyout. This means when a company is bought using a lot of borrowed money instead of using the buyer's own money. It's like buying a toy with your friend's money and promising to pay them back later. The idea is that the company being bought will make enough money in the future to pay back the borrowed money and still make a profit.
Other related terms:
- LC: This stands for letter of credit, which is a document that promises to pay a certain amount of money to someone else on behalf of the person who requested the letter of credit.
- L-Claim proceeding: This is a legal hearing that happens under the Racketeer Influenced and Corrupt Organizations Act. It's meant to make sure that property that is being taken away from someone belongs only to that person and not to anyone else who might claim it.
A more thorough explanation:
Definition: LBO stands for leveraged buyout. It is a type of buyout where a company is acquired using a significant amount of borrowed money, usually through loans or bonds. The assets of the company being acquired are often used as collateral for the borrowed funds. The goal of an LBO is to use the acquired company's assets to generate enough cash flow to pay off the debt used to acquire it, while also providing a return on investment for the buyers.
- When a private equity firm acquires a company using borrowed funds, it is often referred to as an LBO.
- A company with a strong balance sheet and low debt may be a good candidate for an LBO, as it can support the additional debt needed to finance the acquisition.
These examples illustrate how an LBO works and the types of companies that may be suitable for this type of buyout.